Bonus tax could net a windfall of £2.5bn
December 14th, 2009
Bonus tax could net a windfall of £2.5bn | Mail Online.
The Treasury could reap a multi-billion pound bonus tax windfall as banks vow to press ahead with payouts rather than lose high-flying staff to foreign countries.
Pay expert Jon Terry, of PricewaterhouseCoopers, said the government may rake in far more than previously expected - as much as £2.5billion - as firms decide to take a one-off hit rather than slash their bonus pots.
Which would dispel a lot of myths - one being that tax will drive people away.
But it also asks a much harder question - which is why sharehodlers are not saying no.
That is what I really want to know - because if this tax is used to reduce shareholder return it will be really revealing.
Richard, I think you are misunderstanding something very basic about how plcs are governed and managed. Shareholders hire and fire the directors - they hire them to manage the company (execs) and to oversee that management (non-execs). It is management’s responsibility to hire and fire, and remunerate staff.
Such a tax will undoubtedly reduce shareholders returns, but perhaps not as much as loosing staff to competitors. But this is a conundrum for the directors rather than the shareholders.
@alastair harris
I think I have a very good understanding of the duty of a director - I have been one, more times than many people
a) Tell me when the last time was that a plc director was hired or fired by the shareholders
b) When was the last time a set of accounts was not accepted by the shareholders
c) Now tell me why shareholders are being ignored in this equation
“Tell me when the last time was that a plc director was hired or fired by the shareholders”
I don’t know the last time, but I remember that Charles Allen was forced out of ITV by the shareholders.
http://www.guardian.co.uk/media/2006/aug/09/citynews.television
“When was the last time a set of accounts was not accepted by the shareholders”
Good question, probably less frequent than auditors giving up the audit of a plc.
“Now tell me why shareholders are being ignored in this equation”
The biggest affected shareholder in this whole affair is the government. They lose 90% of the value taxes paid by Lloyds and RBS, but keep 100% of the tax receipts. They win a bit if the tax is paid but they win much more if no bonuses are paid at all.
Let’s summarise that shall we Alex?
Shareholders have no control and pick up the crap management leaves behind
Is that a fair synopsis of what you said?
@Richard Murphy
In this particular case that is not a fair summary. The government owns much of the banking sector and calls the shot on taxes, so it is not correct to say have no control.
In the general case, of course the shareholders get the upside and the downside, that is all part of being a shareholder. With respect to directors being removed, that mostly hyappens behind closed doors. Major shareholders are often appointed and may press the non-execs to remove the executive managements, but not surprisingly the details usually stay private. When we hear of chairmen or boards pushing out managing directors this is usually after pressure from shareholders. After all they would be unlikely to take such a move without consulting their major shareholders.
Alex
And there you were telling me the other day there were 3oo banks in London - of which about 1% or so have a UK gov’t stake
You really can’t have it all ways
What’s it to be Alex?
Or are you just making this up as you go along, because that’s what it feels like?
Richard
The Mail naturally gets it wrong. The banks’ primary concern isn’t losing high flyers to other countries; it’s losing high flyers to other UK banks that choose to pay bonuses. In other words, a bank can only protect its shareholders’ funds by paying no bonuses if all/most of its rivals do the same. All it will take is one or two banks to break ranks and they’ll all have to pay bonuses.
Marc
You’re wrong
The bank that says no might find it gets a very different sort of banker
One who cares about banking, their employer, the customer, the shareholder. Not just themselves
On the basis of such people are valuable businesses built
Richard
@Richard Murphy
The government has 90% stakes in 2 of the 4 biggest banks in the world which means it has a disproportionate interest in those banks. In either trying to recover its bailout money or bash the banks for the sake of scoring some political points, the government could easily damage the competitive position of London but th
@Richard Murphy
The government has 90% stakes in 2 of the 4 biggest banks in the world which means it has a disproportionate interest in those banks. In either trying to recover its bailout money or bash the banks for the sake of scoring some political points, the government could easily damage the competitive position of London but that is a completely different matter.
There is little room in banking for “caring” abvout customers. Good service maybe, but the time that customer needs most “care” is the time when the bank stands to lose the most. Given that banks need to have over 50 times a s many productive an current loans for every loan that they write off there is always a limit to how much they can “care” for their customers.
And they know that there will come a time when a very successful company will stop using banks because it gets to be so big that it doesn’t need them.
@Alex
Businesses that don’t care fail
And they deserve to do so